India Budget 2026: Affordable Housing Allocations Increase, But Industry Seeks More
The Union Budget 2026-27, presented by Finance Minister Nirmala Sitharaman on Sunday, increased allocations for the government’s flagship housing schemes but fell short of expectations for the affordable housing industry, with no new sector-specific announcements forming part of the broader proposals.
Affordable housing has remained a key policy lever for driving urban demand, employment, and financial inclusion, with sustained budgetary support over the past decade. However, the real estate sector was left disappointed by the lack of new measures to boost this crucial segment.
“A major disappointment for the real estate sector was that there were no major announcements for affordable housing, which has been in free fall since the pandemic,” Anuj Puri, Chairman at real estate consultancy firm ANAROCK, stated. ANAROCK data indicates that the sales share of affordable housing plummeted after the pandemic—from over 38% in 2019 to 26% in 2022 to just around 18% in 2025. The affordable housing segment was in express need of direct intervention by way of interest stimulants for buyers and developers of affordable housing.
CREDAI, the Confederation of Real Estate Developers' Associations of India, echoed the sentiment. “The long-pending demand to revise the outdated price and area caps has once again been ignored...Affordable housing is not a welfare initiative; it is economic infrastructure. A sustained decline in supply will inevitably lead to higher rentals, longer commuting distances, and the growth of informal housing,” said Sushil Mohta, President at CREDAI West Bengal.
India’s affordable housing segment has been under increasing stress in recent years as rising costs and shifting developer focus have squeezed supply and demand, leading to a clear de-growth trend. In contrast, the government’s flagship Pradhan Mantri Awas Yojana (PMAY) continues to anchor housing policy, with the Centre targeting 2 crore additional rural houses and 1 crore urban houses under PMAY-Gramin and PMAY-Urban in the current phase.
Allocations for housing schemes saw a sharp increase in Union Budget 2026-27, with the outlay for Pradhan Mantri Awas Yojana–Urban (PMAY-Urban) raised to Rs 18,625 crore from Rs 7,500 crore in the previous fiscal year. It also scaled up funding for Pradhan Mantri Awas Yojana–Urban 2.0, increasing the allocation tenfold to Rs 3,000 crore in 2026-27 from Rs 300 crore last year.
In rural housing, allocations under Pradhan Mantri Awas Yojana–Gramin rose to Rs 54,917 crore from Rs 32,500 crore in 2025-26, marking one of the largest increases among major social sector schemes.
Tax incentives have also played a critical role in supporting homebuyers. Currently, interest paid on home loans qualifies for deductions of up to Rs 2 lakh under Section 24, while principal repayments are eligible under Section 80C. The extension of tax holidays for affordable housing projects has helped developers revive supply in the lower- and mid-income segments.
Ahead of the Budget 2026, markets were watching for further relief for first-time buyers, rationalisation of stamp duties, interest subvention schemes, and measures to boost affordable rental housing, especially as urbanisation and migration continue to rise. The Nifty realty sector index was last trading 1.7% lower, as of 2:31 p.m. IST, exchange data showed.
